The Skinny on the 2017 MTC Sales Tax Amnesty Program and How it Affects Amazon FBA Sellers
While almost all FBA sellers like us are in the thick of our preparation for selling on Q4, most recently, there have been a lot of interesting developments regarding Amazon’s sales tax fight as states in the US have vowed to take stricter measures to close down all loopholes that let Amazon customers purchase products online without having to pay sales tax. The ramifications of this will affect our businesses in the short and long term, so it is important that we stay informed and updated regarding this issue.
What exactly is going on right now?
Currently, products purchased directly from Amazon are subject to sales tax. However, for products sold by 3rd party merchants like those selling under the FBA program, Amazon maintains that it is the responsibility of the merchant to collect sales taxes from their buyers on the items the customers purchase. As a result, not all purchases on Amazon are being subjected to sales tax. This has led to state governments using various legal methods to collect tax liabilities incurred from Amazon third-party sales.
Why should I be concerned?
As mentioned in the beginning of the post, the loophole which allows customers to purchase without paying sales tax is about to be closed. The effects of this will be possibly felt by both Amazon customers and FBA sellers as early as this holiday season as customers will most probably pay sales tax on more of their product purchases. For us FBA sellers, this means that a rethinking of our pricing strategy is definitely in order for us to profit off of this lucrative selling season. However, this matter carries long term effects that affect the sustainability of our businesses.
Right now, many FBA sellers are anxious about how all of this develops. Many are worried about the additional burden of collecting sales taxes as they will have to deal with the trouble of filing monthly taxes in various states and taxing districts along with the different tax policies and rates these places enforce. Moreover, there is also the alarming possibility of these states collecting directly from the sellers, as Amazon has the resources to fight off their claims.
There are a lot of speculations, but at this point, the best thing that we can do is to stay informed and be ready.
What is the 2017 MTC Sales Tax Amnesty Program?
25 US states through the Multi-State Tax Commission have offered an amnesty program that will help Amazon sellers address their sales tax liability. In order to avoid paying backdated sales taxes, FBA sellers will have to get a sales tax permit in each of the 25 participating states. The deadline of the registration will be on November 1, 2017.
Read up about all of the details of the MSTC amnesty program here: https://www.prospershow.com/sales-tax-amnesty/
In a 2-hour podcast, Jennifer Dunn of TaxJar and Mike Fleming of Peisner Johnson discuss everything FBA sellers need to know about MTC sales tax amnesty. They answer questions most FBA sellers have regarding the details of the amnesty program, the various concerns of the FBA seller and the participant and non-participant states. Most importantly, they discuss steps you can take to move forward and options you have for filing tax returns.
Should I participate in the amnesty program or not? What do the experts think?
The MTC Sales Tax Amnesty program can be best described as a polarizing proposition, and has generated various opposing opinions from prominent FBA experts. We at FBA Library believe it is best to hear the various takes of the most prominent figures in the industry so that we can form our own educated opinion:
In this video from Jungle Scout, Shane Stinimetz gets the opinions Chris McCabe of EcommerceChris and Sales Tax attorney Paul Rafelson who believe you should think twice before participating in the amnesty program. They explain why they believe this move by the MTC is wrong as it is devoid of any legal basis to sales tax.
Take Advantage of the Amnesty Program
In this Seller Lab blog post by Lena Liberman, she talks about how FBA sellers can take advantage of this seemingly once-in-a-lifetime deal being offered by the MTC to properly address the issue of sales tax remittance to the state. She emphasizes that despite the procedural hassles, the amnesty program is the best way to move forward in the FBA industry.
Yay or Nay
In this video from Seller Labs, Jeff Cohen hosts a panel of experts who give their opinions on whether you should participate in the MTC Sales Tax Amnesty program. On the “Yay” side is Michael Fleming, director of CPA firm Peisner Johnson and Company. On the “Nay” side are Chris McCabe of EcommerceChris and attorneys Paul Rafelson and Jordan Goodman.
The Great Debate
In this debate mediated by Jungle Scout’s Shane Stinimetz, sales tax attorney Paul Rafelson (negative) and Catching Clouds Ecommerce Accounting services co-founder Scott Scharf (affirmative) go back and forth on the benefits and consequences of participating in the MTC Sales Tax amnesty program.
We hope that the resources we provided have helped you understand what the MTC Sales Tax Amnesty Program is and whether it would be beneficial for you to participate. Keep in mind that the deadline for sending in an application will be on November 1, 2017, and we hope that we have been able to contribute in the course of action you have decided to take.
If you wish to learn more about the various facets, intricacies and complexities of Amazon FBA and make your business more profitable, subscribe to our email list!